September 8, 2015 / 2:39 PM / 4 years ago

Russia's Sberbank says to decide on Yamal LNG financing terms by month-end

* Sberbank says China to help finance Yamal LNG

* That Sberbank will decide deal terms by month-end

* Work on ‘package of documents’ for Yamal ongoing - source

By Oksana Kobzeva and Katya Golubkova

MOSCOW/VLADIVOSTOK, Russia, Sept 8 (Reuters) - Russia’s Sberbank, one of the lenders for the Novatek-led Yamal LNG project, will take a decision about the deal’s terms before the end of this month, Maxim Poletayev, first deputy chief executive with the state-controlled bank, told Reuters.

Novatek, Russia’s largest independent natural gas producer, has been hit by Western sanctions imposed over Moscow’s role in the Ukraine crisis. It had expected to get up to $20 billion from Chinese banks by the end of 2014, but later said that the deal had been delayed until mid-2015 and the amount cut to ‘over $10 billion.’

The project, on Russia’s remote Yamal peninsula, is set to produce a total of 16.5 million tonnes of liquefied natural gas (LNG) per year. The first stage, which will produce 5.5 million tonnes annually, should start operations in 2017. Total investment required for the project is $27 billion.

“Everything is on schedule,” Poletayev said. “Sberbank has signed specific obligations and will decide by September-end under which terms it will take part in a deal, how much money it will provide, and under which covenants.”

Novatek signed a framework agreement last week with China’s Silk Road Fund to sell a 9.9 percent stake in Yamal LNG. The deal was announced during a visit by President Vladimir Putin to Beijing. The visit did not yield a deal to secure loans.

Commenting on the deal, the head of China’s Silk Road Fund, Wang Yanzhi, said in a statement at the time that he hoped the fund’s entry into Yamal LNG would “facilitate an expedited closing of the project’s general external financing.”

When asked last week why Putin’s visit did not result in financial agreements for Yamal LNG, Alexander Novak, Russia’s energy minister, said: “As far as I know, there are no problems ... Now there are discussions about technical questions on providing cash.”


Leonid Mikhelson, chief executive of Novatek and one of its co-owners, said in June that Sberbank and Gazprombank had reached an initial agreement to provide the project with $3 billion and $1 billion respectively.

Novatek, whose access to Western funds has been limited due to sanctions, declined to comment. Banking sources told Reuters earlier that Chinese lenders had become more cautious about disbursing funds because of sanctions.

A source close to Yamal said that paperwork on “a package of documents” was ongoing at the moment. “This is a package deal involving a number of financial institutions - they should join in one go,” he said.

The source declined to elaborate why the deadline was not met again and did not provide a new schedule for Chinese financing, saying only it would be above $10 billion but less than $20 billion.

Poletayev played down worries that Chinese banks may have changed their minds. “China did not refuse. In my opinion, they are just waiting for a first step from Russian banks. They (the Chinese) will definitely take part in the project.”

Russian news agency Interfax reported in June that the consortium for Yamal LNG financing consisted of Sberbank, Gazprombank, Russian state development bank VEB, China Development Bank and China Eximbank.

In May, Russian state development bank VEB pledged $3 billion in banking guarantees to Novatek to back Yamal LNG. . Novatek has also secured 150 billion roubles ($2.20 billion) from Russia’s rainy-day National Wealth Fund.

Apart from The Silk Road Fund, others Yamal LNG shareholders include Novatek, which has a controlling stake, and France’s Total and Chinese CNPC, with a 20 percent each.

$1 = 68.2805 roubles Additional reporting by Vladimir Soldatkin and Beijing bureau; Editing by Andrew Osborn

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